Carbon tax ‘leaves Australia exposed’

Business groups have expressed fresh concerns that the Gillard government will leave industry exposed in introducing a carbon tax years ahead of the big global emitters.

The reaction follows countries, including the big emitters, pledging at the Durban climate change conference to forge a legally binding agreement by 2015. But the conference ended without a treaty committing major economies, including the US and China, to cut emissions before 2020.

Australian Industry Group chief executive
Heather Ridout
said yesterday that despite some progress being made in Durban, “Australian industry remains starkly exposed for some years’’ if a carbon tax went ahead next year.

“The agreement in Durban doesn’t go far enough to broaden the range of countries making firm commitments [and] Australia remains vulnerable in a number of respects,’’ Mrs Ridout said.

Under the government’s legislation, Australia’s 500 biggest polluters will pay a fixed price of $23 per tonne of carbon emitted for three years from July 1, 2012, before moving to a market-based system.

The scheme is expected to cut 160 million tonnes of carbon dioxide from the atmosphere by 2020 and will provide compensation to industry and households, but industry has warned the compensation may need revisiting given Treasury modelling anticipated a flexible world price for carbon in 2015-16 of $29 a tonne.

Business Council of Australia chief executive
Jennifer Westacott
warned that Durban had left “the implementation of any agreement many years away’’.

“Anything less than an agreement, including all major emitters taking action, will not be effective and heighten the risks associated with Australia’s approach,’’ Ms Westacott said.

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Opposition Leader
Tony Abbott
said that the “Durban conference had broken up without any significant outcomes’’.

“This just proves that this is going to be a do-nothing decade for global action on climate change,’’ he said.

The chief economist of the International Energy Agency, Fatih Birol, said the new process agreed to at the last minute at the climate change conference was good news for abating emissions because for the first time a “road map" was signed by all the governments that needed to be involved.

But it also raised questions about the process of getting to an international deal, which will not be finalised until 2015 and not take effect until 2020.

“For every $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions," Dr Birol said.

But Climate Change Minister
Greg Combet
defended the outcome yesterday, saying the countries in Durban had “modernised’’ the international climate change framework.

“Developing economies including China have agreed along with the developed economies – including Australia and the US – that we’ll be in the same deal and it would take effect from 2020.

“That is really a very significant breakthrough,’’ he told the ABC.

Negotiations for a post-Kyoto deal would kick off in 2012, Mr Combet said.